Civil-Military Integration and Chinese Military Modernization

7/28/2019 Civil-Military Integration and Chinese Military Modernization

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China has long been aware of the potential benefits of civil-military integration (CMI) in help-

ing to overcome technological shortcomings and other problems plaguing its military-

industrial complex. Beijing especially sees CMI as advancing its long-term aim of

achieving self-sufficiency in developing and producing advanced arms.

Chinese attempts at CMI in the 1980s and early 1990s were basically an effort

to convert military factories over to civilian production. These efforts were

only modestly successful, however, and they did little to transfer innovative

commercial technologies to military uses.

Since the mid-1990s, China has pursued an active strategy of dual-use

technology development and commercial-to-military spin-on, particular-

ly in the areas of microelectronics, space systems, new materials,

propulsion, missiles, computer-aided manufacturing, and information

technologies (IT).

Certain sectors in China's military-industrial complex appear to be ben-

efiting from this dual-use CMI approach, especially shipbuilding and

aerospace (missiles and satellites). The military has also benefited from

leveraging developments in China's booming commercial IT industry, and

consequently it has greatly expanded and improved its capacities for com-

mand, control and communications, information-processing, and information

warfare.

CMI in China is still quite limited, however, and there is little evidence of significant

dual-use technology development and commercial-to-military spin-on in other defense

sectors. There still exist many gaps in China's science and technology base, and China's

commercial high-tech sector is still quite weak.

Given the considerable promise and potential of CMI, however, China will likely continue to promote dual-use

technology development and spin-on as a means of promoting the country's military buildup. It will be difficult if not impos-

sible for the United States and other Western powers to restrict dual-use technology exports to China, but they could per-

haps take steps to offset their effects.

Mr. Richard A. Bitzinger isa Associate Research

Professor with the Asia-

Pacific Center for

Security Studies.

His work focuses mainly

on military and defense

issues relating to the

Asia-Pacific region. His

most recent APCSS publi-

cation is Challenges to

Transforming Asian-

Pacific Militaries

(October 2004). He is also

the author ofTowards a

Brave New Arms

Industry? (Oxford

University Press, 2003).

Asia-Pacific SecurityAsia-Pacific Security SStudiestudies

Civil-MilitCivil-Military Integration andary Integration and

Chinese MilitChinese Military Modernizationary Modernization

Asia-PAsia-Pacifacific Center fic Center for Security Studies Vor Security Studies Volume 3 - Number 9, December 2004olume 3 - Number 9, December 2004

The views expressed in this publication are those of the author(s) and do not necessarily reflect the official policy or position of Asia-Pacific

Center for Security Studies, U.S. Pacific Command, the U.S. Department of Defense, or the U.S. Government.

Key Findings


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Introduction

Civil-military integration (CMI) is the process of combining the defense

and civilian industrial bases so that common technologies, manufactur-

ing processes and equipment, personnel, and facilities can be used to

meet both defense and commercial needs. According to the U.S.

Congressional Office of Technology Assessment, CMI includes:

cooperation between government and commercial facilities in

research and development (R&D), manufacturing, and/or main-tenance operations; combined production of similar military and

commercial items, including components and subsystems, side

by side on a single production line or within a single firm or

facility, and use of commercial off-the-shelf items directly with-

in military systems.

CMI can occur on three levels: facility, firm, and sector. Facilities can

share personnel, equipment, and materials, and even manufacture

defense and civilian goods side-by-side. Firm-level integration involves

separate production lines but the joint military-civilian use of corporate

resources (management, labor, and equipment). Finally, integrated

industrial sectors (such as aerospace or shipbuilding) can draw from a

common pool of research and development activities, technologies, and

production processes.

There are many potential benefits of CMI to military modernization

efforts. Adapting already available commercial technologies to meeting

military needs can save money, shorten development and production

cycles, and reduce risks in weapons development. CMI can also improve

the quality of military equipment and contribute to more efficient pro-

duction and acquisition of military systems. Above all, CMI permits

arms industries and militaries to leverage critical technological advances

in sectors where the civilian side has clearly taken the lead in innovation,

particularly information technologies (IT), such as communications,

computing, and microelectronics. In this regard, the Chinese People's

Liberation Army (PLA) has been particularly influenced by the emerging

IT-based revolution in military affairs, and it sees considerable potential

for force multipliers in such areas as information warfare, digitization of

the battlefield, and networked systems.China, like many countries, is keenly aware of the potential benefits of

CMI in reducing the costs and risks of weapons development and pro-

duction, and in accelerating the process of military modernization.

Additionally, however, the Chinese military sees CMI as advancing its

long-term objective of greater self-sufficiency in arms procurement, by

enabling the PLA "to source more of its critical and sensitive technolo-

gies domestically" and subsequently reduce its dependencies upon for-

eign suppliers for its most advanced weapons. For China, therefore, CMI

is basically a new wrinkle on the classic techno-nationalist development

strategy of a joint government-industry-military effort to acquire, nur-

ture, indigenize, and diffuse critical dual-use technologies deemed essen-

tial to national security and defense. China, therefore, has a considerable

stake in making CMI work.

Background to the Chinese

Military-Industrial Complex

China possesses one of the oldest, largest, and most diversified military-

industrial complexes in the developing world. It is one of the few coun-

tries in the newly industrialized world to produce a full range of military

equipment, from small arms to armored vehicles to fighter aircraft to

warships and submarines, in addition to nuclear weapons and interconti-

nental ballistic missiles.

At the same time, the state-owned military-industrial complex has long

suffered from a number of weaknesses and shortcomings. China's defense

technology base is perhaps 20 years behind the West in several critical

areas, including aeronautics, propulsion (such as jet engines), microelec-

tronics, computers, avionics, sensors and seekers, electronic warfare, and

advanced materials. The arms industry has traditionally been poor when

it comes to quality control and systems integration, and burdened by too

many workers too much productive capability, and too many managers

afraid to take risks and to embrace market forces. As a result, arms pro-

duction in China has largely been inefficient, wasteful, and unprofitable.

Finally, China's defense industry has typically been isolated from the restof the country's industrial base, limiting its access to innovation and

breakthroughs found in other sectors of the national economy.

China's Defense Industry and CMI, Early 1980s

to the Mid-1990s: Defense Conversion

The Chinese defense industry's first attempts at civil-military integration

ran from roughly the early 1980s to the mid-1990s and were basically an

effort to rectify its acute economic, structural, and organizational prob-

lems through a concerted attempt to convert military factories over to the

manufacture of civilian products. In particular, commercial production

was seen as a means of absorbing excess capacity and manpower in the

arms-producing sector, providing defense enterprises with additionalsources of revenues to compensate for their under-performing military

product lines, and encouraging their directors and managers to bring their

enterprises more in line with market forces. This strategy was officially

embodied in Deng Xiaoping's so-called "Sixteen Character" slogan,

which called for "combining the military and civil, combining peace and

war, giving priority to military products, and making the civil sup-

port the military."

With Beijing's enthusiastic blessing, therefore, the defense industry

branched out into a broad array of civilian manufacturing during the

1980s and 1990s. China's aviation industry, for example, established a

number of commercial joint ventures with Western aircraft companies.

The McDonnell Douglas Corporation set up a production line in

Shanghai to build MD-82 and MD-90 passenger jets. Boeing, the

European Airbus consortium, Sikorsky Helicopter, Pratt & Whitney (amanufacturer of jet engines), and Bombardier of Canada all established

facilities at various China aircraft factories to produce subassemblies and

parts for Western civil aircraft. Beginning in the 1980s, Chinese ship-

yards successfully converted much of their production to more profitable

civilian products, such as bulk carriers and general cargo ships. China's

missile industry entered the lucrative satellite-launching business, with

its series of Long March space-launch vehicles.

Additionally, many defense enterprises became engaged in commercial

ventures far outside of their traditional economic activities. Ordnance

factories assembled motorcycles, aircraft companies built mini-cars and

buses, and missile facilities put together refrigerators, television sets, and

even corrugated boxes. By the mid-1990s, 70 percent of all taxicabs,

twenty percent of all cameras, and two-thirds of all motorcycles pro-

duced in China came out of former weapons factories. By the late 1990s,80 to 90 percent of the value of defense industry output was estimated to

be nonmilitary.

Very little of this earlier conversion effort actually aided the Chinese mil-

itary-industrial complex, however. For one thing, defense conversion has

been no guarantee of financial success, and many former weapons facto-

ries have actually lost money on civilian production. In particular, many

failed to create reliable, "main-stay" product lines or develop a more con-

sumer-savvy attitude when it came to price, quality, and adding new fea-

tures. More important, defense conversion did little to benefit China's

defense industry in terms of acquiring and diffusing potentially useful

commercial technologies to the military sector. The concern that con-

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Civil-Military Integration and Chinese Military Modernization


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version meant a process of "swords into plowshares - and better swords"

was largely unfounded. If anything, spin-off - that is, the transfer of mil-

itary technologies to civilian applications (such as in the development of

China's space-launch business, which was initially based on the commer-

cialization of its intercontinental ballistic missile systems) - was more

important during this period than civilian-to-militaryspin-on.

At the same time, the opportunities for the direct spin-on of civilian tech-

nologies to military production remained limited. In the aviation indus-

try, for example, while the Chinese acquired a number of advancednumerically controlled machine tools, for use in commercial aircraft pro-

duction, end-user restrictions kept these from being diverted to military

use. With regard to the shipbuilding industry, even as late as the mid-

1990s commercial programs had little impact on improving China's abil-

ity to produce modern warships or to develop advanced naval technolo-

gies. The shipbuilding industry's low technology base, while sufficient

for building cargo ships, offered little value-added to the design and con-

struction of warships.

This is not to say that some efforts at dual-use technology development did

not take place during this period. In fact, a critical science and technolo-

gy development effort, the so-called 863 Program, was launched in the

mid-1980s; the 863 Program was a long-term initiative to expand and

advance China's high-technology base in a number of areas, many of

which had potential military applications, including aerospace, lasers,opto-electronics, semiconductors, and new materials. The 863 Program,

however, was essentially a basic and applied research activity, and initial-

ly it was not set up (or funded) in order to promote and diffuse these tech-

nologies for practical - and particularly military - uses.

At best, therefore, efforts at civil-military integration during this period

only indirectly aided Chinese weapons development and production, to

the extent that the military-industrial complex benefited from overall eco-

nomic growth. In some cases, defense conversion did help to reduce

overhead costs and generate new sources of income to underwrite new

arms production. In general, however, there were few linkages between

military and civilian production and, in particular, very few efforts to

develop dual-use technologies or to apply innovative civilian technolo-

gies to military uses.

China's Defense Industry and CMI, Mid-1990s to the

Present: Exploitation of Dual-Use Technologies

China's approach to civil-military integration began to change around the

mid-1990s, and it entailed a crucial shift in policy, from conversion (i.e.,

switching military factories over to civilian use) to the promotion of inte-

grated dual-use industrial systems capable of developing and manufac-

turing both defense and military goods. This new strategy was embodied

and made a priority in the defense industry's five-year plan for 2001-

2005, which emphasized the dual importance of both the transfer of mil-

itary technologies to commercial use and the transfer of commercial tech-

nologies to military use, and which therefore called for the Chinese arms

industry to not only to develop dual-use technologies but to actively pro-

mote joint civil-military technology cooperation. Consequently, the spin-

on of advanced commercial technologies both to the Chinese military-

industrial complex and in support of the overall modernization of the

PLA was made explicit policy.

The key areas of China's new focus on dual-use technology development

and subsequent spin-on include microelectronics, space systems, new

materials (such as composites and alloys), propulsion, missiles, comput-

er-aided manufacturing, and particularly information technologies. Over

the past decade, Beijing has worked hard both to encourage further

domestic development and growth in these sectors and to expand link-

ages and collaboration between China's military-industrial complex and

civilian high-technology sectors. In 2002, for example, the Chinese gov-

ernment created a new enterprise group, the China Electronics

Technology Corporation, to promote national technological and

industrial developments in the area of defense-related electronics. Under

the Tenth Five Year Plan (2001-2005), many technology breakthroughs

generated under the 863 S&T program were finally slated for develop

ment and industrialization. Defense enterprises have formed partnerships

with Chinese universities and civilian research institutes to establish tech-

nology incubators and undertake cooperative R&D on dual-use technolo-

gies. Additionally, foreign high-tech firms wishing to invest in China

have been pressured to set up joint R&D centers and to transfer more

technology to China.

These efforts at exploiting dual-use technologies have apparently paid

dividends in at least a few defense sectors. China's military shipbuilding

for example, appears to have particularly benefited from CMI efforts over

the past decade. Following an initial period of basically low-end com-

mercial shipbuilding - such as bulk carriers and container ships - China's

shipyards have since the mid-1990s progressed toward more sophisticat-

ed ship design and construction work. In particular, moving into com-

mercial shipbuilding began to bear considerable fruit beginning in the

late 1990s, as Chinese shipyards modernized and expanded operations

building huge new dry-docks, acquiring heavy-lift cranes and computer-

ized cutting and welding tools, and more than doubling their shipbuilding

capacity. At the same time, Chinese shipbuilders entered into a number

of technical cooperation agreements and joint ventures with shipbuilding

firms in Japan, South Korea, Germany, and other countries, which gavethem access to advanced ship designs and manufacturing technologies -

in particular, computer-assisted design and manufacturing, modular con-

struction techniques, advanced ship propulsion systems, and numeri-

cally controlled processing and testing equipment.

As a result, military shipbuilding programs collocated at Chinese ship-

yards have been able to leverage these considerable infrastructure and

software improvements when it comes to design, development, and con-

struction. This in turn has permitted a significant expansion in naval ship

construction since the turn of the century, and since 2000, China has

launched at least six new diesel-powered submarines, three destroyers,

and four frigates, with eight more warships under construction; this is

nearly double the rate of naval ship construction during the 1990s.

Moreover, the quality and capabilities of Chinese warships have also

apparently improved. In 2001, for example, China began work on thefirst in a new class of domestically developed, 9,000-ton guided-missile

destroyer, the Type 052B, equipped with a long-range air-defense missile

system and incorporating low-observable features in its design. A further

refinement on this class, outfitted with a rudimentary Aegis-type phased-

array radar, is the Type-052C destroyer, first launched in 2003. China is

also currently producing the Song-class diesel-electric submarine, the first

Chinese submarine to have a skewed propeller for improved quieting and

capable of carrying an encapsulated antiship cruise missile that can be

launched underwater.

Even more important, the PLA has clearly benefited from piggy-

backing on the development and growth of the country's commercial

IT industry. The PLA is working hard to expand and improve its

capacities for command, control and communications, information-

processing, and information warfare, and it has been able to enlis tmany local IT firms in support of its efforts. These include Huawe

Technologies (which manufactures switches and routers for commu-

nications networks), Zhongxing Telecom (ZTE, mobile and fiber-

optic networks), Julong (switchboards), and Legend and Beijing

Founder (computers). Many of these companies have close ties to

China's military-industrial complex, and some, such as Huawei

Julong, and Legend, were founded by former PLA officers

Consequently, the PLA has developed its own separate military com-

munications network, utilizing fiber-optic cable, cellular and wire-

less systems, microwave relays, and long-range high frequency

radios, as well as computer local area networks.

Two other defense sectors are worth noting when it comes to achieving

some success in civil-military integration. First, China's satellite business

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has entailed the considerable development and application of dual-use

civilian technologies. Chinese telecommunications satellites are basical-

ly commercial in nature, as is China's rudimentary Beidou navigation

satellite system, but both serve military purposes as well. In particular,

recent Chinese successes in launching earth observation satellites - such

as the Ziyuan-1 and Ziyuan-2 - have critical military applications in pro-

viding near-real time - and increasingly high-resolution - imagery intelli-

gence. In addition, many of the technologies being developed for com-

mercial reconnaissance satellites, such as charge-coupled device cam-eras, multispectral scanners, and synthetic aperture radar imagers, have

obvious spin-on potential for military systems.

Secondly, China's small but growing helicopter industry has always been

dual-use in execution, such as the licensed-production of the French AS-

365 Dauphin 2 (used by the PLA Navy for antisubmarine warfare, for

example), and the more recent development of the indigenous Z-10 util-

ity helicopter, which includes an armed attack version.

Conclusions

Despite these achievements, Chinese civil-military integration efforts -

particularly when it comes to commercial-to-military spin-on have

remained limited. There is little evidence so far of any significant civil-

military integration in other sectors of the Chinese defense industry, par-ticularly the aviation industry where one might expect CMI to be a natu-

rally occurring phenomenon. Commercial and military aircraft manufac-

turing in China is still carried out not only (and perhaps unavoidably) on

separate production lines, but also in separate facilities and often in sep-

arate enterprises, with little apparent communication and crossover

between these compartmentalized operations. Moreover, with the excep-

tion of helicopters (and possibly transport aircraft), the technological

overlap between civil aviation and military aircraft (particularly fighter

aircraft) is small and not very conducive to CMI. As such, there are few

opportunities to share personnel, production processes, and materials, and

perhaps even fewer prospects for joint R&D or collocated production.

Likewise, China's overall record of indigenous high-technology develop-

ment and innovation has been mixed, further limiting opportunities for

CMI. There still exist many gaps and weaknesses in China's S&T base,

and very little indigenous design and manufacturing actually takes place

in much of China's high-technology sectors. Rather, high-tech

production is still oriented toward the fabrication of relatively mature

consumer or commodity goods, such as DVD players or semiconductors,

built according to original equipment manufacturer (OEM) specifications.

In addition, China still lacks sufficient numbers of skilled designers

engineers, scientists, and technicians in crucial high-technology sectors,

particularly IT, and so most high-end items, such as

microprocessor chips, must be imported.. Finally, many of the country's

high-technology incubators are still very much in their nascent stage, and

Beijing continues to spend relatively little on high technology compared

to the United States and the rest of the West.

Moreover, much of China's high-technology R&D and industrial base is

still foreign-controlled, either through foreign-owned companies or joint

ventures. Foreigners own virtually all of China's high-technology intel-

lectual property and most of its manufacturing capacity (such as semi-

conductor plants), and as such, 85 percent of China's high-tech exports

come from foreign-owned or joint ventures operations. In addition, many

foreign-established so-called R&D centers are actually geared more

toward training and education than joint S&T development.

Overall, therefore, civil-military integration in China is still very much in

its early stages, and both civilian and military authorities have yet to for-

mulate a specific strategy for more effectively exploiting CMI. As one

consequence, therefore, the R&D of defense-specific technologies, as

well as the importation of such technologies, continues to be crucial in

the modernization of the country's military-industrial complex and in the

development of next-generation weapons systems.

Nevertheless, CMI still has considerable potential to revolutionize the

way militaries develop and produced defense-critical systems. It holds

particular promise in the area of adapting commercial information tech-nologies - know-how increasingly seen as essential to transforming

armed forces for next-generation warfare - to military purposes. For

these reasons, therefore, China is likely to continue to search for ways to

promote dual-use technology development and exploit commercial-to

military spin-on in support of its military modernization efforts.

Beijing's efforts to utilize dual-use technologies for military moderniza-

tion have considerable implications for the United States and its allies in

the Asia-Pacific. China is in the midst of an unprecedented military

buildup that could greatly upset the regional security calculus. The

United States has an obvious interest in retarding this effort - hence, its

continued opposition to lifting the Western ban on arms sales to China

Dual-use technology exports are much harder to control, however, par-

ticularly since such transfers are usually commercial and therefore seen

as benign and beneficial to both seller and buyer alike. In addition, many

of these technologies are already widely diffused throughout the world,

and it would be difficult and even impractical to try to restrict their sales

Consequently, while the United States may not be able to halt the process

of Chinese civil-military integration and dual-use technology exploita-

tion, it can, by better understanding the strengths and weaknesses of such

an approach, perhaps take steps to offset their effects. In any event, the

proliferation of military technologies is no longer simply a matter of

immediate end-use but of all of its potential uses.


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Civil-Military Integration and Chinese Military Modernization